>>how to create a more level playing field for smaller retailers - Cliff Goodman, ex trading director, Budgens

It is with dismay that I observe the debate with regards to the power and dominance of the big four multiples and the impact that they have on independents and smaller multiples.
If we accept the fact that the reason independents are closing is simply that their customers prefer to shop elsewhere, then the solution is clearer. The question is not how we stop the march of the multiples. It is, how do we compete with the multiples?
Compare a Tesco Express/One Stop to the average independent and ask yourself the question, where would you rather shop? This question has already been answered by millions of consumers including myself.
To reverse the trend, the independents will need to offer the same (or arguably better) standards of service, range, quality and value for money. This can be achieved, but many independents have a very long way to go and will be under threat when a credible alternative opens in their vicinity.
To raise standards will require investment and for many this will be an obstacle due to lack of finance or vision, or both.
Why is Tesco able to dominate one of the most competitive sectors in Europe? Simple. It does things better than most of its competitors. It has better standards, ranges, retail prices, marketing, store development, logistics, diversification and acquisition strategies, and so on.
But most important of all, it purchases better than everyone else [The Competition Commission, October 2000], and with increased market share, this gap has probably widened. This, of course, enables Tesco to invest in all of the above and be arguably the best retailer in the UK.
So can it be stopped? How do you stop a supplier-fuelled, highly tuned juggernaut? Legislation can be the only answer. However, this can only help to level the playing field.
Ultimately the consumer must decide.
What legislation could be introduced? Perhaps restrictions on acquisitions, on store expansions or diversification of opening hours? It would be a sad day for the consumer if any of these restrictions were imposed on any company. Competition must be free, fair, with the same rules for all.
So what can be done? Stop below-cost selling and local price flexing? Both of these were deemed to be operating against the public interest by The Competition Commission in its October 2000 report but no action was taken. At the risk of sounding like a cracked gramophone, a major step forward would be to level the playing field in terms of the cost of the goods.
We don’t want more nonsense such as the supermarkets code of practice but a simple piece of legislation (with real teeth) that requires all branded suppliers to publish terms and conditions of sale, clearly defining invoice cost and all discounts and payments for supply chain efficiencies.
This would need to cover items such as advertising allowance, promotional costs, new line monies, overriders, and so on - in short, any payment or discount between a supplier and customer. It would be an effective policing regime managed by proven industry professionals.
Additionally, to reduce the cost of commodities and own label, independents and small multiples need to embrace technology such as e-sourcing and/or ensure volumes are maximised by pooling volumes through a buying consortium or symbol group.
If there is to be fair competition, then everyone should be able to purchase at the best terms, or at least understand what needs to be done to achieve them. After all, cost of goods is more than 70% of retailers’ costs. What could an independent or small multiple achieve if its cost of goods was reduced by about 15%? This would ensure that suppliers no longer (willingly or otherwise) continue to fuel the growth of the strong at the expense of the weak.
Then if Tesco dominates, it will be simply because it is the best retailer.